SEBI imposes penalty for rule violation

SEBI imposes penalty for rule violation

Timely disclosure of relevant information by Listed Companies helps in eliminating Information asymmetry.

The Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs. 3 lakh on the Noticee Sinew Developers Pvt.Ltd.as it failed to make timely disclosures thereby violating Regulation 52(1), 52(4) and 52(5) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (LODR Regulations).

Herein, SEBI received a letter from Vistara ITCL (India) Ltd. (Vistara), a SEBI registered Debenture Trustee in which Vistara had provided a list of companies from which it had not received till that date the Half-Yearly Communication (HYC) as per Regulation 52(4) of LODR Regulations for the half-year ended March 31, 2019.

The aforesaid list of companies included Sinew Developers Pvt. Ltd. (Noticee/Company). In view of the aforesaid information, SEBI conducted an examination and had observed prima facieviolation of Regulations52(1), 52(4) and 52(5)of LODR Regulations by the Noticee.

The Adjudicating Authority(AO) has opined that the procedural difficulties faced by the company in a convening of the Board meeting and filing the said disclosures due to non-cooperation by debenture holder of the company are their internal matter which does not absolve the Noticee from filing the said disclosures under LODR Regulations.

It was also noted that a listed entity is required to comply with the relevant regulations/directions issued by SEBI from time to time.

The Noticee had contended that there were only two debenture holders from whom the funds have been raised by them, and no losses have been caused to the investor nor have any disproportionate gain or unfair advantage derived to the Company as a result of any purported defaults which were venial and technical in nature.

In this context, it was noted that financial statements are important because they contain significant information about a company's financial health. They are the barometer of a company's operations. Investors depend on the truth and fairness in the financial statements to make informed decisions. Moreover, it is not only investors but a lot of stakeholders like operational creditors and lending institutions like banks that need to gauge the profitability and track record before opening up lines of credit to a company.

The Judgment of the Hon'ble SAT in the matter of Coimbatore Flavors& Fragrances Ltd. vs SEBI was referred to wherein it was held that the purpose of these disclosures is to bring about more transparency in the affairs of the companies. True and timely disclosures by a company or its promoters are very essential from two angles. Firstly; investors can take a more informed decision to invest or not to invest in a particular scrip secondly; the Regulator can properly monitor the transactions in the capital market to effectively regulate the same.

Based on the aforesaid findings, it was concluded that the Noticee had violated the provisions of Regulations 52(1), 52(4) and 52(5) of LODR Regulations and the penalty was imposed.